Reinvigorating Product Strategy
Peter Yu [Senior Director of Strategy & Marketing, MULTEK]
Product Strategy is core to any company’s success. How can organizations launch successful new products, extend the lifecycle of existing lucrative products, or turn under-performing products into stellar ones? This paper will show, by using examples, how today’s shifting market and technology trends offer truly disruptive opportunities to those who “connect the dots” — including how PCB manufacturers can help.
This paper is being submitted on behalf of Multek, a Top 20 PCB Company globally according to industry analysts Prismark (2016). Founded in 1978, Multek’s operations include acquired businesses with legacies dating back to the Apollo missions by the United States’ National Aeronautics and Space Administration (NASA). With offices in over 15 countries, Multek owns factories in the United States of America, People’s Republic of China, and Philippines. Multek’s global headquarters are located in Hong Kong and boasts state-of-the-art Research and Development labs in Silicon Valley and China. While Multek is independently managed, it is a wholly-owned subsidiary of Flex – a Nasdaq-listed company with the ticker symbol FLEX.
Flex (formerly Flextronics) is a ~25B USD global leaders in design, manufacturing, distribution and aftermarket services. Headquartered in San Jose, California, Flex is a leader in design, manufacturing, distribution and aftermarket services. With 200,000 employees worldwide and offices in 30 countries, Flex provides downstream intelligence and vertical integration advantages to Multek. Both companies excel in the development of innovative technologies, sketch to scale thinking, and world-class manufacturing.
The Printed Circuit Boards (PCB) industry serves many market segments, such as:
– Telecommunications & Networking
– Connected Home
– Servers & Storage
– Security & Aerospace
– Semiconductor Equipment
The Digitalization of Everything is driving growth across all of these segments and hence growth in PCBs. This can be further observed by the acceleration in Gross Domestic Product (GDP) growth across time. According to the World Bank, Maddison Project and De Long (UC Berkeley), the average world GDP per capita grew at a rate of 2x every hundred years during the Industrial Age, between 1750 and 1850. This then increased to doubling every forty years during the Modern
Age (1850-1970), and further accelerated to 2x every twenty-five years during the Information Age (1970-2010). Today, GDP is growing even faster, at about 2x everyone fifteen years. This is the hallmark of the Intelligence Age – our current epoch since 2010.
The Intelligence Age is defined by IoT. But instead of the more common “Internet of Things” definition, by IoT we mean the “Intelligence of Things.” According to Flex, the Intelligence of Things is an evolving ecosystem of smart, connected devices, machines and systems that interact to deliver greater capabilities, efficiencies, and experiences – changing the way we live, work and play.
- MARKET TRENDS
The market opportunities available to companies with the vision to digitize their products and services are substantial and span multiple industries. For instance, in the Automotive industry, there were 23 million connected cars – vehicles with embedded connectivity — in 2015. HIS Automotive forecasts this to grow to 152 million by 2025, representing a compounded annual growth rate of 21%. Other industries will see similar explosive growth due to the Intelligence of Things, according to McKinsey Global Institute’s market research. Some examples of this economic impact are listed below:
- Healthcare will see a 10-20% reduction in chronic disease costs, generating $2 trillion USD of value
- Consumers will drive a 100% growth in connected devices, amounting to $1 trillion USD of incremental spend
- The Energy industry will realize 2.5-5% savings in Operating Costs, resulting in $500 billion USD of potential profits
- Transportation sectors will cut vehicle damage costs by 25%, translating in to $200 billion USD of savings
- Agriculture applications will see a 10-20% yield increase, delivering $100 billion USD worth of benefits
As we see markets shift towards digital products and intelligent applications, and the tremendous value this can create, Technology Trends are also enabling these new market opportunities. The continual arc towards greater miniaturization, higher density, and faster speeds are accelerating the development of IoT products like mobile devices, wearables, sensors, connected cars, and more. This intersection of market and technology trends have given birth to myriad of break-through products, all of which require advanced PCB technology to work. For example:
- Smart motorcycle helmets that transform a once staple safety product to a wireless-enabled communications and navigation device.
- Fitness watches that transform analog time-pieces to health and fitness applications that offer windows into the quantified self
- Self-driving, electric vehicles represent the convergence of environmental-friendliness, smart connectivity, sensors, big data analytics, and fast processing speeds in the automobile industry
- Wearable metronomes is a particularly clear example of the market opportunities digitalization offers a traditionally stagnant item which has not been innovated for centuries, more on this example later
- Recently Oral-B announced smart toothbrushes which can lead to advanced applications like diagnostics on brushing techniques, plaque levels, personal hygiene habits, etc. including parents tracking whether children are brushing their teeth regularly
- It has been widely reported that Google has been working on smart contact lenses, this is of course after their pioneering Google Glass
The metronome is a familiar analog device for anyone who has ever played or tried to learn a musical instrument. It essentially has not been innovated since the 1700’s and delivers a consistent tick-tock like beat so that all musical instrument players and even signers can synchronize to a beat. The human body is not able to hold a consistent beat for a significant time period and hence we have for centuries relied on the steady, dependable metronome. While unsexy in nature, this low-technology device has become a widely-accepted mechanical necessity with predictable growth rates that are no faster than the number of new and aspiring musicians each year (not too different than population growth in many markets).
Enter a disruptive innovator like Sound Brenner, a German/Hong Kong startup that has reinvigorated the metronome and developed entirely new use cases that will differentiate its product and also increase the underlying demand for Sound Brenner metronomes due to entirely new value propositions. Sound Brenner has created a wearable metronome that silently delivers a beat to musicians whenever and wherever. The vibrating wearable can be synchronized between band members for a more choreographed performance. In addition, these wearable metronomes can by sync’d to audio/visual displays, pyrotechnics, and other performance-enhancing experiences a musician or group have programmed. In short, Sound Brenner’s metronomes go beyond being a metronome but cannot be possible with the right PCB circuitry that powers this wearable, connected product.
Sound Brenner and the other preceding examples illustrate that opportunity is literally all around us…we simply have to connect the dots and have the vision for these new or re-envisioned products. Digitalization paves the way. In fact, IDC says that by 2020 the Intelligence of Things will bring 50 billion connected devices to market, creating $7.1 trillion USD in total addressable market value. This compares to an estimated 10 billion connected devices today (2015).
- CONNECTING THE DOTS
Strategy can help connect the dots across industries and technologies to give birth to new ideas, such as in Sound Brenner’s case which marries a traditional analog metronome with wearable technology. In fact, many of today’s most compelling and innovative products are the result of connecting different technologies across unrelated industries and joining them to produce something new that leap-frogs traditional competitors.
For example, the Telecommunications Industry is now working on 5G technology. Everyone knows this but those within Telecommunications, including their PCB suppliers, are going to be the experts in 5G. At the same time, Computing has traditionally relied on PCB technology to enable faster processing at lower heat and power consumption. This is also a mature area that’s been around for decades. Likewise, the automotive industry is leading the charge on machine-to-machine (M2M) sensors. This is partly driven by safety regulations such as those in the US where all new cards must of rear-view video to avoid running over low-height objects when backing up. What do you get or enable when you combine technologies such as 5G, PCBs and sensors? You end up with the kind of bandwidth, processing speed, and M2M intelligence that make possible autonomously-driven electric vehicles. And of course everyone knows the company that pioneered this for the mass market is enjoying tremendous success today.
In the area of consumer health, we have seen the confluence of wearable technologies, medical applications, and mobile communications. These applications each leverage certain technologies such as Patches/Tattoos (Wearables), Near Field Communications (Mobile), and Printed Electronics (Medical). Connecting these disparate pieces results in the kind of smart wearable patches that are in use by insulin users who need periodic, measured injections when their blood-sugar levels dip below acceptable. This is but one example of how connecting the dots will drive 33% Compounded Annual Growth Rate (CAGR) in digital health, lifting that segment from a $5.7 billion USD addressable market in 2015 to $97 billion USD by 20250, according to projects from Park Associates and GSMA Research
Our final example looks at the footwear, software, and fitness industries and how automation, mobile apps, and flexible circuit technologies are transforming each, respectively. When one connects these three industry/technology pairs, we end up with innovative products like smart running shoes that can diagnose your running style, gait, speed, stress-points, and more. The PCB, specifically flexible printed circuit (FPC), that goes inside such running shoes are critical as nobody wants to put anything remotely rigid or possessing a short lifespan inside their shoes. Moreover, such FPCs must not overheat, require charging, or break under the daily stress of high-impact running and exercise. In fact, it is only because of FPCs being capable of withstanding various environmental factors, retaining their functionality even when bent or twisted, and dissipating heat safely, that wearable technology products can thrive. IDC estimates wearable devices will grow from 72 million units in 2015 to 156 million units by 2019, representing a CAGR of 42%.
- REINVIGORATING YOUR PRODUCT STRATEGY
The era of digitalization is upon us and like the autonomously-driven vehicles, wearable insulin-dispensing patches, and smart running shoes, even the most mundane products – such as a boring metronome – can have new lease on life through connectivity and intelligence. In 1943 Psychologist Abraham Maslow coined his now famous hierarchy of human needs. This begins with Physiological needs being at the foundation (i.e. air, water, food), followed by Safety and Security. Once those are met, humans have Social needs followed by Esteem and finally Self-Actualization. But in 2015 it seems that our most basic need now is Connectivity (i.e. wifi or Bluetooth). Of course this is to add a bit of humor, but have we collectively modified Maslow’s Hierarchy in today’s digital age?
The benefits of digitizing products are clear. Companies can turn bad products into good products or extend the lifecycle of existing products. Digitalization can also help you launch new products that become game-changers in your industry, such as Tesla had done for the automotive industry. While the task may seem daunting, to become the next Tesla for your industry, there are numerous well-established frameworks to help you formulate your product strategy:
- Boston Consulting Group’s Growth-Share Matrix (also known as the Product Portfolio Matrix) can help you identify which products in your existing portfolio can be reinvigorated through digitalization. Can you turn “dogs” (poor-performing products) into “stars?”
- Booz-Allen’s Product Lifecycle framework can help you identify when solid products are nearing the nadir of their useful life. Instead of letting them fade away, an increasingly viable option is to try to make them connected and “smart” so their product lifecycles can extend and companies can get more mileage out of past branding investments.
- Bain & Company contends that product strategy need not even look at existing products within one’s portfolio or where they are in their lifecycle. Instead brand new product lines or families can be launched using Bain’s Adjacency Framework. This looks at a company’s core business and maps out various market segments, verticals, geographies, form factors etc. and helps companies map out adjacent vectors to enter.
Regardless of which Management Consulting tool you use, it is clear that digitalization offers differentiation and can be game-changing for companies and industries. Reinvigorating your product strategy through digitalization keeps you at the forefront of innovation.
To help companies more quickly realize their digital product plans, PCB fabricators can offer their own expertise or even IP as rapid “building blocks” to enable faster design of smart and connected end systems. For example, PCB maker Multek offers it’s patented RipStopTM flexible circuit technology that can easily go inside demanding wearable products that need to withstand dropping, compression, twisting and flexing without electrical failure. Another example of technology that enables digitalization is eSkin which is an electronic communication tattoo based on Multek NovacladTM. These are just a couple of the examples of enabling PCB technologies that form the building blocks of future digital products.
In addition to utilizing the right product strategy frameworks and technology enablers, companies should leverage PCB partners who understand technology trends across verticals. This will be critical in quickly bridging market opportunities, technology trends, advanced PCB platforms and solutions to the OEMs that want inordinate growth and return on investment during the current Age of Intelligence. These PCB partners are likely at the forefront of Industry 4.0 and not only helping their customers develop IoT solutions but also employing IoT within their own “factories of the future” for smarter, more automated manufacturing.
The Intelligence of Things is changing the way we live, work and play. New market and technology trends are opening doors to many opportunities. Those who “connect the dots” during this period of unprecedented opportunity stand to gain break-through strategies. Digitalization reinvigorates products but requires creativity and know how (to say the least). Using enabler PCB technologies and experienced partners can make the difference between succeeding or not as an OEM.
ABOUT THE AUTHOR
Peter Yu has 25 years of Business and Technology experience in the Americas and Asia-Pacific. He currently leads Strategy, Marketing, Pricing and Program Management for Multek reporting to the company’s President. Previously, Peter spent a decade at Oracle, leading Strategy, Sales, Consulting, Development, Operations, and other teams across continents.
Earlier in his career, Peter helped turn around Gateway Inc. by growing Asia and Latin America businesses 75%, and was a Case Team Leader/Management Consultant at Bain. Peter started with IBM and holds an MBA with honors from UCLA, a BS from Berkeley, and a FIDE Master title in chess.